Bart Campbell, CFA, is a portfolio manager who has recently met with a prospective client, Jane Black. After conducting a survey market line (SML) performance analysis using the Dow Jones Industrial...

Bart Campbell, CFA, is a portfolio manager who has recently met with a prospective client, Jane Black. After conducting a survey market line (SML) performance analysis using the Dow Jones Industrial Average as her market proxy, Black claims that her portfolio has experienced superior performance. Campbell uses the capital asset pricing model as an investment performance

measure and finds that Black’s portfolio plots below the SML. Campbell concludes that Black’s

apparent superior performance is a function of an incorrectly specified market proxy, not superior

investment management. Justify Campbell’s conclusion by addressing the likely effects of an incorrectly specified market proxy on both beta and the slope of the SML.